Column: Workers' Comp

Opinion | This Denied-Claims Data from Lockton Is Turning Heads

By: | August 30, 2018 • 2 min read
Roberto Ceniceros is senior editor at Risk & Insurance® and chair of the National Workers' Compensation and Disability Conference® & Expo. He can be reached at [email protected] Read more of his columns and features.

In nearly 25 years of reporting on risk management, I don’t recall seeing a research report that so struck me for its potential to help upend the handling of workers’ comp claims.

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Earlier this year, Lockton Companies released a report that’s turning heads among savvy employers hunting for practical strategies to improve claims performance.

The broker’s analysts found 67 percent of denied claims convert to paid claims within a year. The kicker: Denying then approving claims increases costs 55 percent over claims paid without first getting denied.

Claims denied and then paid cost $15,694, on average, while claims accepted and paid cost $10,153.

Wow! That’s a bombshell.

Every employer might want to evaluate whether to alter their current claims management strategies and perhaps rewrite their expectations of third-party administrators and insurers.

Lockton looked at 273,000 claims from 150 employers and found that claim denial rates increased between 2013 and 2017. So denied claims have the potential to drive needless costs, and yet more claims are getting denied.

The report also strikes me for its revelation that some traditional practices for managing claims have been a significant blunder, costing employers countless dollars over the years. But that’s my interpretation of it, not the report authors’ conclusion.

Lockton found that expenses including litigation account for the extra costs of denied and then accepted claims. There are also soft costs, Lockton points out, such as decreased productivity.

What’s also troubling is that Lockton looked at 273,000 claims from 150 employers and found that claim denial rates increased between 2013 and 2017. So denied claims have the potential to drive needless costs, and yet more claims are getting denied.

Lockton told Risk & Insurance® increased amounts of data confronting claims adjusters and employers may be driving the increased claims denials.

Does that mean data’s promise is questionable? I’ll leave that for another discussion to focus on how Lockton’s findings could help upend the normal handling of claims.

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Lockton’s study emerges as more employers adopt advocacy strategies, with some beginning to show positive outcomes. Advocacy refers to a less adversarial, friendlier claims management approach.

Advocates talk about simplifying claims processes for injured workers. They talk about spending less time and using fewer resources questioning the legitimacy of so many claims. Those resources would be better spent on the smaller number of truly challenging claims that generate greater cost because of their specific attributes.

Lockton’s findings are helping fuel the advocacy camp by confirming that, indeed, the claims industry may be ill-served by aggressively questioning the legitimacy of too many claims.

That should have risk managers asking whether the claims handlers managing their claims — be it insurers, third-party administrators or in-house adjusters — have been taking the right approach. &

More from Risk & Insurance

More from Risk & Insurance

2018 Risk All Stars

Stop Mitigating Risk. Start Conquering It Like These 2018 Risk All Stars

The concept of risk mastery and ownership, as displayed by the 2018 Risk All Stars, includes not simply seeking to control outcomes but taking full responsibility for them.
By: | September 14, 2018 • 3 min read

People talk a lot about how risk managers can get a seat at the table. The discussion implies that the risk manager is an outsider, striving to get the ear or the attention of an insider, the CEO or CFO.

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But there are risk managers who go about things in a different way. And the 2018 Risk All Stars are prime examples of that.

These risk managers put in gear their passion, creativity and perseverance to become masters of a situation, pushing aside any notion that they are anything other than key players.

Goodyear’s Craig Melnick had only been with the global tire maker a few months when Hurricane Harvey dumped a record amount of rainfall on Houston.

Brilliant communication between Melnick and his new teammates gave him timely and valuable updates on the condition of manufacturing locations. Melnick remained in Akron, mastering the situation by moving inventory out of the storm’s path and making sure remediation crews were lined up ahead of time to give Goodyear its best leg up once the storm passed and the flood waters receded.

Goodyear’s resiliency in the face of the storm gave it credibility when it went to the insurance markets later that year for renewals. And here is where we hear a key phrase, produced by Kevin Garvey, one of Goodyear’s brokers at Aon.

“The markets always appreciate a risk manager who demonstrates ownership,” Garvey said, in what may be something of an understatement.

These risk managers put in gear their passion, creativity and perseverance to become masters of a situation, pushing aside any notion that they are anything other than key players.

Dianne Howard, a 2018 Risk All Star and the director of benefits and risk management for the Palm Beach County School District, achieved ownership of $50 million in property storm exposures for the district.

With FEMA saying it wouldn’t pay again for district storm losses it had already paid for, Howard went to the London markets and was successful in getting coverage. She also hammered out a deal in London that would partially reimburse the district if it suffered a mass shooting and needed to demolish a building, like what happened at Sandy Hook in Connecticut.

2018 Risk All Star Jim Cunningham was well-versed enough to know what traditional risk management theories would say when hospitality workers were suffering too many kitchen cuts. “Put a cut-prevention plan in place,” is the traditional wisdom.

But Cunningham, the vice president of risk management for the gaming company Pinnacle Entertainment, wasn’t satisfied with what looked to him like a Band-Aid approach.

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Instead, he used predictive analytics, depending on his own team to assemble company-specific data, to determine which safety measures should be used company wide. The result? Claims frequency at the company dropped 60 percent in the first year of his program.

Alumine Bellone, a 2018 Risk All Star and the vice president of risk management for Ardent Health Services, faced an overwhelming task: Create a uniform risk management program when her hospital group grew from 14 hospitals in three states to 31 hospitals in seven.

Bellone owned the situation by visiting each facility right before the acquisition and again right after, to make sure each caregiving population was ready to integrate into a standardized risk management system.

After consolidating insurance policies, Bellone achieved $893,000 in synergies.

In each of these cases, and in more on the following pages, we see examples of risk managers who weren’t just knocking on the door; they were owning the room. &

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Risk All Stars stand out from their peers by overcoming challenges through exceptional problem solving, creativity, clarity of vision and passion.

See the complete list of 2018 Risk All Stars.

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]